A new dark pool launched today by CA
Cheuvreux will aim to alleviate buy-side “anxiety” about high-frequency trading
and offer larger trade sizes than are typically available in other venues.

The European agency broker’s BLINK MTF has
received regulatory approval from the UK’s Financial Services Authority to
convert from a broker crossing network into an multilateral trading facility (MTF). It
will offer trading in 1,700 stocks spanning 14 of the region’s markets and will only
include liquidity from the firm’s clients, thereby excluding high-frequency
trading (HFT) and other proprietary flow.

“We have seen a huge amount of anxiety
among buy-side firms on HFT,” Ian Peacock, global head of execution services at
CA Cheuvreux told theTRADEnews.com. “But this is more to do with the buy-side
knowing exactly what flow they are interacting with, rather than labelling HFT
as good or bad.”

Because of its focus on institutional
trading flow, Peacock said he expected order sizes to be larger than the
€3,000-6,000 average execution size found on dark MTFs such as Turquoise and
BATS Chi-X Europe. CA Cheuvreux’s expertise in mid- and small-cap names would
also offer new and complementary liquidity opportunities for buy-side firms
compared to other dark pools, Peacock said.

Fees for trading, clearing and settling
trades on the platform total two basis points, although Peacock anticipates the MTF will be used primarily by existing CA Cheuvreux clients, who will
be charged for using BLINK as part of their overall commissions, rather than
attracting direct members.

“We expect BLINK to be used as part of our
overall execution service as opposed to a venue that seeks flow from smart
order routers,” he said. “The tariffs aren’t supposed to be part of a competitive
proposition like other dark pools out there. It’s simply a collection of our
unconflicted agency liquidity amalgamated in one place for our clients.”

Cheuvreux is the fourth broker to launch
its own dark MTF, following in the footsteps of Nomura, UBS and Goldman Sachs.
Many brokers have put their BCN strategies under review following strong
signals from European regulators that the practice could be outlawed or at best
restricted in MiFID II. Most recently, the European Parliament’s Economic and
Monetary Affairs Committee, which is in the process of reviewing MiFID,
proposed that the organised trading facility, a new type of venue introduced by
the European Commission last year, be restricted to non-equity instruments only. If upheld, this would require BCNs to reclassify as MTFs or systematic
internalisers.